First-Party Insurance vs Third-Party Insurance | Simmons & Fletcher

what is the difference between a first party insurance claim and a third party insurance claim?

The difference between a first party insurance claim and a third party insurance claim is who you file the claim with and what duties you are owed as a result. If you file a claim against your own insurance company, it is a first party claim. if you make the claim against someone else’s policy, it is a third party claim. An important difference between first-party insurance and third-party insurance is that the insurer owes you certain “fiduciary” duties that are implicit in the first-party insurance contract it purchased from you. meaning they have to treat you fairly as defined by the insurance code. In a third party claim, the insurer does not have a direct relationship with you and therefore does not have the same fiduciary duties.

what is a first party insurance claim?

first party insurance is insurance that covers the losses of the person named in the policy. the policyholder may be a company, an individual, or a group of individuals of a particular class, such as employees of a company, a person’s family, or the occupants of a particular vehicle. A first party claim is when the policyholder files a claim against their own insurance policy. Some examples of first person insurance are:

Reading: What is first party insurance

  • personal injury protection coverage under an auto insurance policy
  • medical or health insurance
  • medical payment coverage under an auto or homeowners policy
  • uninsured or underinsured motorist coverage under an automobile policy
  • damage to covered personal or business property from wind, storm, hail, fire, flood or other disasters
  • wall renters insurance coverage
  • what is a third party insurance claim?

    third party insurance is insurance purchased to protect a person against liability for damage or loss they have caused. the policyholder may be a company, an individual, or a group of individuals of a particular class (such as employees of a company, a person’s family, or the occupants of a particular vehicle). A third party claim is when someone makes a claim against someone else’s insurance policy. Some examples of third party insurance are:

    • liability insurance coverage under an automobile policy
    • commercial general liability coverage
    • owner’s liability coverage for personal injury caused by the insured
    • general insurance policies
    • Commercial Motor Vehicle Liability Coverage
    • civil liability insurance for animals or canines
    • professional liability insurance
    • civil liability insurance
    • product liability insurance
    • directors and officers civil liability insurance
    • How are first party insurance claims different from third party insurance claims?

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      Under a first party insurance claim, the insured files a claim directly against their own insurance company and what they are entitled to recover is defined by the terms of the policy. Because the policy is a contract between the insured and the insurance company, it carries with it certain duties and obligations such as the duty to act in good faith. It is a fiduciary-type relationship that is regulated by the State of Texas under the Texas Insurance Code.

      The failure of the insurance company to respect the terms of the policy may result not only in a breach of contract, but also in a breach of the duty of good faith and fair dealing. these violations could subject the insurer to penalties such as triple damages and/or 10% interest on funds improperly withheld.

      In a third party insurance claim, the person making the claim (“claimant”) is not the insured. the claim is made against the insured, not against the insurance company itself. As a result, the insurance company has no contract with the claimant and has no duty to the claimant to act in good faith or otherwise. instead, all duties are owed to the insured.

      therefore, if the insurance company fails to handle the claim in good faith, the policyholder has a possible cause of action against the insurance company. This cause of action only exists if:

      • the claimant (or their attorney) sends a longshore demand letter,
      • the insurance company does not settle the claim, resulting in a verdict greater than the policy limit,
      • and a jury finds in a subsequent trial that the adjuster did not exercise the same degree of care in settling the claim as he would have in handling his own affairs.
      • what is a bad faith insurance claim?

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        the texas insurance code regulates the treatment of the insured by the insurance company. Violations of these rules by an insurance company are insurance bad faith. If an insurance company acts in bad faith, the insured may file a claim for these bad faith violations. Some examples of insurance companies acting in bad faith include:

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        • Unreasonable delays: Insurance companies may intentionally extend the time it takes to investigate a claim before agreeing to pay.
        • misrepresenting the law or the language of the policy: this happens when the insurance company deliberately interprets a policy against the interests of the claimant. insurance companies must be truthful in their statements about policies and the law.
        • refusal to pay: If the insurance company refuses to pay a claim that should be covered by the policy, this can be classified as bad faith.
        • Not Conducting a Full Investigation – An insurance company must conduct a prompt and thorough investigation into the policyholder’s claim.
        • Offering less than the value of a claim: Placing a low bet or offering much less than the value of a claim is insurance bad faith.
        • threat-based language: any threatening statement to the insured or a third party.
        • So, whether it is first party insurance or third party insurance is important because it determines what your rights are when the insurance company does not diligently resolve your claim.

          related reading:

          Understanding the Texas Auto Liability Policy

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